For VAT registered businesses it is important to distinguish between an expense incurred in the course of the job and recharged to the end client, and a genuine disbursement which is the clients responsibility but initially paid by the business. 

What is a disbursement?

The key issue in deciding whether the item is an expense or a disbursement is to consider who the expense belongs to. 

By way of an example, a solicitor transacting on a house purchase will incur various costs on behalf of his client, such as search fees, land registry fees and stamp duty land tax. All these expenses are the responsibility of the purchaser, so are a genuine disbursement where the solicitor shouldn’t charge VAT on his invoice to the client provided certain procedures are followed, for example: 

What is an expense?

Let’s assume a management consultant is engaged to carry out a piece of work away from home. She purchases a return train ticket, purchases food for subsistence and pays for accommodation. It is agreed with the end client these will all be recharged. 

In this situation she should charge VAT on the travel, food and accommodation expense, as these are the costs of the consultant and not the client. Effectively the costs recharged are an extension to her own consultancy fee. 

What can I take away?

When considering the VAT treatment of an expense recharge or a disbursement the first point of call is to consider who bears ultimately responsibility for the costs. If it is the end client then it is likely to be a disbursement where VAT shouldn’t be charged, but if it is the business’s responsibility then it is likely VAT should be charged 

If you need any further support regarding VAT disbursements or any other tax issues our specialist experts are here to help you. Please contact the team on 0161 476 8276 or email [email protected]

 Posted 27th September 2017

 Reviewed 12th December 2018


The information contained herein is of a general nature and is not intended to be received as formal professional advice. Whilst we endeavour to provide accurate information, there can be no guarantee that the information is accurate as of the date it is received, or that it will continue to be accurate in the future, due to legislative changes. It is therefore important that before you act upon any information contained herein you seek appropriate professional advice to take account of your exact circumstances.

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